Wells Fargo Mortgage Business Up, Credit Losses Down

Mortgage banking and reduced reserves for credit losses helped Wells Fargo, the largest U.S. home loan originator, register higher first quarter profit.
San Francisco-based Wells Fargo, the nation’s fourth-largest bank, said net income was $4.25 billion, or 75 cents a share, in the first quarter of 2012, compared with $3.76 billion, or 67 cents, a share in the same period a year earlier. The bank beat Wall Street expectations.
Mortgage banking noninterest income was $2.9 billion, up $506 million from fourth quarter 2011, on $129 billion of originations, compared with $120 billion of originations in fourth quarter.
Credit quality continued to improve in the first quarter, with first quarter 2012 net charge-offs at $2.4 billion, or 1.25 percent (annualized) of average loans, down from fourth quarter 2011 net charge-offs of $2.6 billion (1.36 percent).
The loan loss reserve release was $400 million, compared with $600 million in the prior quarter.
“We have seen significant improvement in credit performance over the past two years, and expect continued but slower improvement this year as losses approach a stable, more normalized level,” said Chief Risk Officer Mike Loughlin. “Absent significant deterioration in the economy, we continue to expect future reserve releases in 2012.”

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